Don't ignore the market on your doorstep

Ulster Business talks to John MacMahon of John MacMahon & Co Chartered Accountants about cross border opportunities for Northern Ireland businesses and the legal issues affecting cross border workers.

John MacMahon is a long term advocate of cross border business having established his own firm as a cross border practice in 1982 with offices in Dundalk and Newry. Just recently the firm has added a Belfast office to its network, which offers the same cross border expertise from the North’s capital.

One of his early case studies of cross border success is John Boyle, MD of the now billion pound business Boyle Sports. With the support of John MacMahon & Co, John Boyle took one betting shop in Northern Ireland in 1989 and turned it into one of Ireland’s largest independent bookmakers with 160 retail shops across Ireland.

For John and the hundreds of clients he represents, cross border trade is a fact of life rather than a strategic plan and he believes all Northern Ireland-based firms should be looking to the market on their doorstep to enhance their businesses prospects.

He says: “To ignore a marketplace that’s four times the size of Northern Ireland because of fear of the unknown could be short sighted. There is a common misconception that it’s expensive to do business in the Republic when in fact it can be the opposite. With the collapse of the Celtic Tiger, business rates and general overheads are comparable to Northern Ireland, employer costs are less than Northern Ireland, and there are favourable tax advantages for cross border businesses.

“Over 50% of our clients already operate on a cross border basis and for the other half, part of our role is to educate clients about the positive impact that exports to the Republic can have on their business.”

For some businesses, cross border trade is taken as a given – particularly in border locations like Newry.

“We have one food service client based in Newry and two of his largest clients are in the Republic, so he’s exporting without really even thinking about it. For other businesses who want to export, starting with ROI is a way to test the ground, learn from it, set up the appropriate internal systems, as a stepping stone to European export,” comments John.

While he is quick to say there is no set ‘one size fits all’ business model, in general terms the most advantageous position for Northern Ireland firms is to incorporate the company in the south to get access to the 12.5% tax rate – although management and control must be exercised in that jurisdiction to qualify. However, depending on the level of business being done in each jurisdiction, for some Northern Ireland firms it may be better to open an ROI branch which can also gain from the lower tax rate.

There are also a number of support packages available from Intertrade Ireland and Invest NI for manufacturing and tradeable services business with export potential.

John is a huge advocate of a cross border approach, but he admits there are of course potential pitfalls, not least with the foreign exchange risk.

“While we do have some clients who sell in Sterling – and there’s nothing to prevent that – in general, customers would prefer it if the business took the exchange risk,” he says.

While changes have been made to company law in recent years and the interaction between taxes North and South, anomalies continue to exist which penalise cross border businesses and these are issues John and his firm continue to challenge.

The firm successfully lobbied the Irish Government to remove section 44 of the 1999 Company Act which required Northern businesses setting up firms in the Irish Republic to appoint an Irish director resident in the 26 counties or hold a substantial bond to the value of €25,000 (requiring a payment of €1,800 every two years).

“When dealing with clients’ interests we come up against things like this regularly,” says John. “We’re currently concerned with difficult pension regulations for cross border workers and we’re communicating with senior civil servants in Dublin and London to achieve equity. We credit our firm as offering ‘more than just the numbers’ and these are the kind of issues we will continue to challenge for the benefit of our clients.”

For more information contact John MacMahon & Co, Belfast on 028 9051 7077 or visit www.johnmacmahon.com